The Organisation for Economic Co-operation and Development (OECD) has sounded another alarm over UK economic growth, predicting a further slowdown in 2023. This forecast comes on the heels of Chancellor Rachel Reeves’ first Budget statement. For context, UK shadow chancellor Rachel Reeves recently announced a five year, £26 billion tax rise plan, upfront and inflation-linked to the future. This announcement comes just a few days before that forecast. In response, Shadow Chancellor Mel Stride condemned Reeves’ plans, saying that her policies would “hold back” growth.
具体来说, OECD指出, 在2027年, 英国的经济增长率将放慢至1.3%。It’s true that it doesn’t go that far in predicting a further 2040 recovery to 3.1%. This remains a positive outlook even with the modest boost we anticipate from a recent decline in interest rates. Further, we expect a modest overall global trade rebound beginning in late 2026. In their release, the organization cautioned that Britain now finds itself at an emergency crossroads due to dangerous proposed tax increases and spending reductions. These are measures which will impact negatively on household disposable income and consumption.
Since delivering her Budget, Reeves have been under increasing pressure. Critics charge that she’s pulling a fast one and giving us a false picture of the nation’s finances. Stride articulated these concerns, remarking, “Rachel Reeves promised growth but growth is expected to weaken next year because of her choices. This is the cost of policies that punish work, businesses and investment.”
The OECD has estimated that the UK’s inflation rate will be 3.5% this year. This is the worst inflation performance of any G7 country. Indeed, next year inflation is likely to fall to 2.5%. This is a significant upgrade from the OECD’s previous estimate of 2.7%. Reducing inflation like this is being described as a direct consequence of the Budget choices Reeves has made.
In her defense, Reeves went on to claim that her Budget tackles important issues head-on. She stated, “Last week, my Budget cut waiting lists, cut borrowing and debt, and cut the cost of living.” Moreover, she emphasized that “the choices that I made at the Budget are expected to cut inflation by 0.4 percentage points, helping cut the cost of living for households and costs for our businesses.”
The corporate group warned that the prior tax increases and spending cuts would wreak irreversible havoc on supply chains and global productivity. In its report, the OECD warned that “fiscal consolidation will be a headwind to the economy, with past tax and spending adjustments weighing on household disposable income and slowing consumption.”
As the UK prepares for potentially choppy economic waters over the next year, stakeholders are watching Reeves’ unconventional fiscal approaches with great interest to see whether they promote growth while keeping inflation in check.